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CTS Announces Second Quarter 2020 Results

CTS Corporation

Adapting to New Market Conditions

LISLE, Ill., July 31, 2020 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS) today announced second quarter 2020 results.

  • Sales were $84.2 million, down 30% year-over-year. Sales to transportation customers declined 53%, and sales to other end markets grew 14%. Excluding $5.4 million in sales from the QTI acquisition, sales to other end markets grew 1%.

  • Net earnings were $4.9 million or $0.15 per diluted share versus $11.9 million or $0.36 last year.

  • Adjusted diluted EPS was $0.16.

  • Free cash flow was $9.1 million, and at quarter-end, we were net cash positive.

  • New business wins were $105 million.

“I am grateful to our teams around the globe for their resilience and care for our customers and partners in this unprecedented downturn. We are adapting our cost structure due to the prolonged impact of COVID-19,” said Kieran O’Sullivan, CEO of CTS Corporation. “We received new business awards in some promising areas. Our focus remains on key strategic growth investments. We are making progress on our diversification into non-transportation markets and continue to position the business for the opportunities ahead of us.”

2020 Guidance

Due to ongoing market uncertainties, management is not providing revenue or earnings guidance at this time.

Conference Call

As previously announced, the Company has scheduled a conference call at 11:00 a.m. (EDT) today to discuss the second quarter financial results. The dial-in number is 800-309-1256 (720-543-0314, if calling from outside the U.S.). The passcode is 290044. There will be a replay of the conference call from 2:00 p.m. (EDT) today through 2:00 p.m. (EST) on Friday, August 14, 2020. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The replay passcode is 7215300. A live audio webcast of the conference call will be available and can be accessed directly from the Investors section of the website of CTS Corporation at www.ctscorp.com.

About CTS

CTS (NYSE: CTS) is a leading designer and manufacturer of products that Sense, Connect, and Move. The company manufactures sensors, actuators, and electronic components in North America, Europe, and Asia, and provides engineered products to customers in the aerospace/defense, industrial, medical, telecommunications/IT, and transportation markets.

For more information, visit www.ctscorp.com.

Safe Harbor

This document contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. Forward-looking statements are based on management's expectations, certain assumptions and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1A. of CTS’ Annual Report on Form 10-K. We undertake no obligation to publicly update our forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.

Contact

Ashish Agrawal
Vice President and Chief Financial Officer

CTS Corporation
4925 Indiana Avenue
Lisle, IL 60532
USA

Telephone: +1 (630) 577-8800
E-mail: ashish.agrawal@ctscorp.com


CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts)

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

2020

 

2019

 

2020

 

2019

Net sales

$

84,197

 

 

$

120,684

 

 

$

187,272

 

 

$

238,308

 

Cost of goods sold

57,630

 

 

79,480

 

 

127,806

 

 

156,490

 

Gross Margin

26,567

 

 

41,204

 

 

59,466

 

 

81,818

 

Selling, general and administrative expenses

14,668

 

 

17,036

 

 

31,427

 

 

34,597

 

Research and development expenses

5,522

 

 

6,257

 

 

12,930

 

 

13,048

 

Restructuring charges

135

 

 

911

 

 

375

 

 

2,995

 

Gain on sale of assets

 

 

(83

)

 

 

 

(122

)

Operating earnings

6,242

 

 

17,083

 

 

14,734

 

 

31,300

 

Other (expense) income:

 

 

 

 

 

 

 

Interest expense

(909

)

 

(467

)

 

(1,760

)

 

(933

)

Interest income

304

 

 

440

 

 

635

 

 

872

 

Other income (expense), net

256

 

 

(1,107

)

 

(1,726

)

 

(1,010

)

Total other (expense), net

(349

)

 

(1,134

)

 

(2,851

)

 

(1,071

)

Earnings before income taxes

5,893

 

 

15,949

 

 

11,883

 

 

30,229

 

Income tax expense

1,036

 

 

4,006

 

 

3,218

 

 

6,867

 

Net earnings

$

4,857

 

 

$

11,943

 

 

$

8,665

 

 

$

23,362

 

Earnings per share:

 

 

 

 

 

 

 

Basic

$

0.15

 

 

$

0.36

 

 

$

0.27

 

 

$

0.71

 

Diluted

$

0.15

 

 

$

0.36

 

 

$

0.27

 

 

$

0.70

 

 

 

 

 

 

 

 

 

Basic weighted – average common shares outstanding:

32,262

 

 

32,799

 

 

32,364

 

 

32,803

 

Effect of dilutive securities

242

 

 

406

 

 

284

 

 

422

 

Diluted weighted – average common shares outstanding:

32,504

 

 

33,205

 

 

32,648

 

 

33,225

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

$

0.04

 

 

$

0.04

 

 

$

0.08

 

 

$

0.08

 



CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)

 

(Unaudited)

 

 

 

June 30,

 

December 31,

 

2020

 

2019

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

145,981

 

 

$

100,241

 

Accounts receivable, net

59,798

 

 

78,008

 

Inventories, net

44,266

 

 

42,237

 

Other current assets

14,750

 

 

16,992

 

Total current assets

264,795

 

 

237,478

 

Property, plant and equipment, net

99,349

 

 

105,038

 

Operating lease assets, net

24,369

 

 

24,644

 

Other Assets

 

 

 

Prepaid pension asset

64,104

 

 

62,082

 

Goodwill

106,056

 

 

106,056

 

Other intangible assets, net

80,622

 

 

85,215

 

Deferred income taxes

21,278

 

 

19,795

 

Other

2,816

 

 

3,046

 

Total other assets

274,876

 

 

276,194

 

Total Assets

$

663,389

 

 

$

643,354

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current Liabilities

 

 

 

Accounts payable

$

32,820

 

 

$

48,219

 

Operating lease obligations

3,051

 

 

2,787

 

Accrued payroll and benefits

8,725

 

 

9,564

 

Accrued expenses and other liabilities

33,175

 

 

36,378

 

Total current liabilities

77,771

 

 

96,948

 

Long-term debt

141,300

 

 

99,700

 

Long-term operating lease obligations

24,473

 

 

24,926

 

Long-term pension obligations

6,504

 

 

6,632

 

Deferred income taxes

6,303

 

 

5,637

 

Other long-term obligations

6,146

 

 

4,292

 

Total Liabilities

262,497

 

 

238,135

 

Commitments and Contingencies

 

 

 

Shareholders’ Equity

 

 

 

Common stock

310,953

 

 

307,932

 

Additional contributed capital

39,775

 

 

43,689

 

Retained earnings

515,841

 

 

509,766

 

Accumulated other comprehensive loss

(93,155

)

 

(91,726

)

Total shareholders’ equity before treasury stock

773,414

 

 

769,661

 

Treasury stock

(372,522

)

 

(364,442

)

Total shareholders’ equity

400,892

 

 

405,219

 

Total Liabilities and Shareholders’ Equity

$

663,389

 

 

$

643,354

 



CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION - UNAUDITED

Earnings Per Share

The following table reconciles GAAP diluted earnings per share to adjusted diluted earnings per share for the Company:

 

Three Months Ended

 

Six Months Ended

 

June 30, 2020

 

June 30, 2019

 

June 30, 2020

 

June 30, 2019

GAAP diluted earnings per share

$

0.15

 

 

$

0.36

 

 

$

0.27

 

 

$

0.70

 

 

 

 

 

 

 

 

 

Tax affected charges to reported diluted earnings per share:

 

 

 

 

 

 

 

Restructuring charges

0.01

 

 

0.02

 

 

0.01

 

 

0.07

 

Foreign currency (gain) loss

(0.03

)

 

0.02

 

 

0.01

 

 

0.01

 

Non-cash pension expense

0.01

 

 

 

 

0.02

 

 

0.01

 

Environmental charges

0.02

 

 

 

 

0.02

 

 

 

Discrete tax items

 

 

 

 

0.02

 

 

 

Adjusted diluted earnings per share

$

0.16

 

 

$

0.40

 

 

$

0.35

 

 

$

0.79

 



Additional Information

The following table includes other financial information not presented in the preceding financial statements.

 

Three Months Ended

 

Six Months Ended

 

June 30, 2020

 

June 30, 2019

 

June 30, 2020

 

June 30, 2019

Depreciation and amortization expense

$

6,611

 

 

$

5,995

 

 

$

13,143

 

 

$

11,919

 

Stock-based compensation expense

$

817

 

 

$

1,579

 

 

$

1,045

 

 

$

2,793

 


Non-GAAP Financial Measures

Adjusted earnings per share is a non-GAAP financial measure. The most directly comparable GAAP financial measure is diluted earnings per share.

CTS adjusts for these items because they are discrete events, which have a significant impact on comparable GAAP financial measures and could distort an evaluation of our normal operating performance.

CTS uses an adjusted earnings per share measure to evaluate overall performance, establish plans and perform strategic analysis. Using this measure avoids distortion in the evaluation of operating results by eliminating the impact of events which are not related to normal operating performance. Because this measure is based on the exclusion or inclusion of specific items, they may not be comparable to measures used by other companies which have similar titles. CTS' management compensates for this limitation when performing peer comparisons by evaluating both GAAP and non-GAAP financial measures reported by peer companies. CTS believes that this measure is useful to its management, investors and stakeholders in that it:

  • provides a meaningful measure of CTS' operating performance,

  • reflects the results used by management in making decisions about the business, and

  • helps review and project CTS' performance over time.

We recommend that investors consider both actual and adjusted measures in evaluating the performance of CTS with peer companies.